VARIATION OF LEASES
(" .--(1) The RTM company shall enjoy the right to make an application to the leasehold valuation tribunal (LVT) for variation of all existing leases which are defective or inadequate in dealing with--
(a) repair or maintenance of the flat, building in which the flat is contained, or land or building let to the tenant under the lease,

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(b) insurance of the flat,
(c) maintenance of installations or services reasonably necessary to ensure that the occupier of the flat enjoys a reasonable standard of accommodation,
(d) recovery of expenditure and advance payment on receipt of expenditure,
(e) computation of service charge under the lease,
(f) creating and building up adequate reserve funds, and
(g) such other matters which shall be for the future benefit of the building and its occupiers.
(2) The LVT in considering such applications shall have regard to provisions which may prevent the proper upkeep of the property and equity between the parties.
(3) Before serving notice on the tribunal, the RTM company shall give at least two months notice to all parties setting out the terms of variation, their reasons and intentions.
(4) Where the parties are in agreement, this shall be incorporated in the notice in order that the LVT can endorse the agreement.").

The noble Earl said: We now move on to the difficult and vexed question of variation of leases. Members of the Committee who have dealt with leasehold properties will know what a difficult area it is.

I am delighted that, for a change, I am able to do some of the Government's work for them. In their consultation paper, the Government pointed to the problems of the existing provisions with regard to leases, the difficulties that there were and the reasons why they should be changed. When we come to the Bill, there is nothing to take forward the thoughts that were in the consultation paper. I thought that I would do it for them. The Minister may, if he wishes, take my amendment away and have it drafted properly, but I hope that he will not destroy the arguments.

The problem comes where there is a legitimate ground for a variation of lease, because the lease is not specific or is contradictory. It prevents right-to-manage companies getting going and taking over the operation of their buildings. Most of us believe that that is a good thing and should be encouraged. There are far too many bad leases and old leases that do not make reference to the important issues facing landlords and tenants today. Yet one cannot get those leases changed. That is the nub of the problem.

My amendment sets out areas in which the leases, which might be defective or inadequate, can be changed for specific areas. That is taken to the local valuation tribunal. It is fair to both parties, it will continue to encourage the right-to-manage companies to proceed, it will bring the management of flats up to a better standard than is taking place at the moment and, above all, it will give parity to landlords and tenants. That is only to be welcomed. I beg to move.

Lord Goodhart: My amendment comes first. I am sorry that I was not quick enough of the mark. Our Amendment No. 238YA applies to long leases of flats generally and not just to RTM companies. That is the distinct advantage of it as compared with Amendment No. 195.

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It is based on the proposals in the Government's consultation paper of last August. Section 35 of the Landlord and Tenant Act 1987 allows leases of flats to be varied by the court as they are unsatisfactory in particular respects. The consultation paper (Cm 4843) states in paragraph 5 on page 181 that,

"the grounds for an individual leaseholder of a flat to bring forward an application are narrow, and omit a number of important management-related matters".

The consultation paper goes on to discuss what those matters are. All the proposals in this amendment come directly from the Government's consultation paper.

Subsection (2) of Amendment No. 238YA transfers jurisdiction for variation from the court to the leasehold variation tribunal. That follows a Government proposal to transfer jurisdiction to the LVT to reduce the costs and duration of applications.

Section 35(2) of the 1987 Act sets out the grounds on which an application to vary may be made in a number of sub-paragraphs. Our amendment extends and clarifies these. The new subsection (2A) of Section 35 of the 1987 Act clarifies what is necessary to make repairing and maintenance obligations satisfactory. The new subsection (2B) modifies Section 35(2)(b) by requiring the entire building to be insured under a single policy to avoid problems which arise if each lessee insured separately, those problems already having been discussed in connection with an earlier group. I should say that in subsection (3A)(b) there is a misprint. It reads, "expenditures insured in respect of administration"; it should read, "expenditures incurred". New subsection (3A) clarifies the meaning of expenditure in the context of recovery of expenditure incurred in performing obligations under the lease for the benefit of other parties. New subsection (3B) makes it clear that a proper lease must include provision for payment in advance and interest on late payments. The amendment follows precisely the proposals set out on pages 180 to 184 of the consultation document. I should like to know why the Government have not included these proposals in the Bill. I invite them to do so now.

Amendment No. 240, which is grouped with Amendment No. 238YA, deals with a somewhat different issue. It would be better if I dealt with that in its proper place in the groupings list.

Lord Richard: I am not very often accused of being too fast, but on this occasion I apologise to the noble Lord, Lord Goodhart.

Amendment No. 240A follows very much on the lines of the amendment moved by the noble Earl, Lord Caithness, and those spoken to by the noble Lord, Lord Goodhart. I do not propose to go through it in any detail as the thrust of it is clear. It is that variations should be made to the lease in circumstances in which it improves the management. It is an issue on which I believe the Government had envisaged legislating, but somehow, in the course of the drafting of the Bill and its introduction, it seems to have become lost. I hope the Minister can tell us today that he is minded to look at this point again.

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It seems to be a fairly simple and attractive proposition that, if the lease inhibits proper management, in certain circumstances there should be a variation of the lease so that that management may be made more effective and more efficient. I am not wedded to the wording of the amendment any more than the noble Earl, Lord Caithness, was wedded to his. I hope that the Minister will feel able to smile benevolently on the thrust of the amendment.

Lord McIntosh of Haringey: I can reassure all Members of the Committee who have spoken that we share their concerns. We believe there should be effective means to seek the variation of defective leases. There are already provisions in the Landlord and Tenant Act 1987 which allow for that to be done. We have always agreed that they are not entirely satisfactory. We consulted on proposals to improve them alongside the draft Bill. The noble Lord, Lord Goodhart, and the noble Baroness, Lady Hamwee, have proposed an amendment which is designed to enact these proposals. Indeed, Amendment No. 240A, which stands in the name of my noble friend Lord Richard, is along the same lines. I can say straight away that we will consider the point and see whether it is possible to bring forward an amendment at Report stage to meet those concerns.

The noble Earl, Lord Caithness, made a parallel suggestion that we should grant rights to allow the RTM company to seek lease variations. This is not necessary, because paragraph 10 of Schedule 7 already allows the right-to-manage company to make use of the 1987 Act. Paragraph 10 states:

"Sections 35, 36, 38 and 39 of the 1987 Act (variation of long leases relating to flats) have effect as if references to a party to a long lease (apart from those in section 38(8)) included the RTM company".

It would not be right to grant the company additional rights in this respect which are not open to landlords or tenants. I hope the noble Earl, Lord Caithness, can be persuaded that the correct way to look at this issue is to make sure that the existing rights properly care for the needs of everyone, including the RTM company, and that he will be content to allow us to consider that matter further.

I understand from the noble Lord, Lord Richard, that he is not now raising the issue of service charge accounts, because that is a matter to which, if necessary, we can return later in the Bill. However, I can tell him now that, on this issue too, we shall consider what can be brought forward at Report stage. The same applies to his reference to the appointment of a manager regime. Amendments have been tabled that relate purely to that subject, which we are due to discuss when we reach Chapter 5. Perhaps we can discuss the whole issue then.

The Earl of Caithness: I am grateful to the noble Lord for that response. He has covered many of the concerns. He has met my concerns and those of the noble Lords, Lord Goodhart and Lord Richard. I shall read with care what he has said.

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I have to say that I am finding it much harder today to hear in this room than last time.